2013 (7) TMI 581 - HC - Income Tax

Undisclosed income - Income received from various people - Tribunal held that no sufficient evidence produced to prove that money belong to other people - Held that - No evidence was produced by them to substantiate that the said sums were paid to them by the neighbourhood people for carrying out certain construction activity - No substantial question of law to admit the appeals - Decided against assessee.

Summary

Issues:
1. Whether the bank deposit should be treated as undisclosed income under Section 68 of the Income Tax Act?
2. Whether the alternative submission to treat the deposit as undisclosed business turnover was considered by the Income Tax Appellate Tribunal?

Analysis:

1. The assessees, who are Civil Engineers, made cash deposits in their savings bank account. They claimed that the money belonged to various individuals who had entrusted it to them for civil works. The assessees explained that they provided skilled workers for house renovation and construction, and the money did not belong to them. They offered 5% of the cash deposits for taxation, amounting to Rs.2,50,000/- each.

2. The Joint Commissioner of Income Tax examined the case under Section 144 of the Income Tax Act and found the assessees failed to prove that the money belonged to the neighbors. The Assessing Officer added the cash deposits to the taxable income as the assessees could not provide evidence to support their claims. The Commissioner of Income Tax (Appeals) upheld the assessment, leading the assessees to approach the Income Tax Appellate Tribunal.

3. The Income Tax Appellate Tribunal observed that no evidence was presented to prove that the savings bank deposits were related to other persons. Even after being given an opportunity to substantiate their claims, the assessees failed to provide acceptable evidence. Consequently, the Tribunal upheld the assessment under Section 143(3) of the Act.

4. The assessees filed Miscellaneous Applications before the Tribunal, arguing that the cash deposits should be treated as unexplained cash credits, not undisclosed business turnover. However, the Tribunal rejected this contention, stating that the assessees were attempting to re-argue the appeals. The Tribunal found no mistake to entertain the Rectification Petition.

5. The Senior Counsel for the assessees contended that necessary expenditure should have been deducted when adding the unexplained cash credits to income. However, the Court found this contention unacceptable as no evidence was provided to prove that the sums were payments for construction activities. As the issues were factual findings, the Court dismissed the Tax Case Appeals at the admission stage, stating no substantial question of law was found.