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2013 (10) TMI 1074 - AT - Income TaxApplication of section 69 of the Income Tax Act - Addition on account of Deposits in the bank account of Francis Joseph - Rs.3,00,000/- - Held that - Tax authorities have not placed reliance solely on the sworn statement given by Shri Francis Joseph They have taken into consideration the conduct of the assessee, capacity of the assessee, capacity of Shri Francis Joseph and the surrounding circumstances also in deciding this issue - Under these circumstances, the question of violation of natural justice does not arise by not providing opportunity of cross examination to the assessee - AO issued summons to Shri Francis Joseph more than one time, but the said person declined to appear before the AO, as he was scared of the assessee. Thus, it cannot be said that the AO did not offer opportunity of cross examination, but the external circumstances blocked the AO to provide such an opportunity to the assessee. It is also pertinent to note that the assessee, being brother in law of Shri Francis Joseph, could not produce him before the AO to retract the statements already given by him before DDIT. On the contrary, Shri Francis Joseph, despite the alleged threat from the assessee, has firmly stood by his statement that the impugned bank account belongs to the assessee only. Tax authorities have corroborated the statement given by Shri Francis Joseph with sufficient material and surrounding circumstances. Accordingly held that the transactions found in the bank account, except the first two transactions, belong to the assessee only Thus, confirmed assessment of deposits found in the bank account standing in the name of Shri Francis Joseph, in the hands of the assessee. Addition u/s 68 of the Income tax act - Unexplained credit in the capital account of the firm - Rs.5,60,000/- - Amount found credited in the capital account of the assessee in the books of partnership firm - Held that - Assessee did not claim that he received a sum of Rs.10,15,000/- on slaughter tapping and sale of trees before the AO either during original assessment proceeding or during reassessment proceeding. He has made this submission for the first time before Ld CIT(A). In any case, the assessee could not substantiate his submissions with any credible evidence. On the contrary, the Ld A.R has only presumed that the copies of agreements might be available in the assessment record - Assessee did not make any attempt to inspect the assessment record in order to find out the availablity of the three agreements Decided against the Assessee. Addition of loan of Rs.4.00 lakhs taken from Shri George Joseph Held that - It is well settled proposition that the initial burden of proof is placed upon the assessee u/s 68 of the Act, i.e., the assessee has to discharge three main ingredients viz., the identity of the creditor, genuineness of transactions and credit worthiness of the creditor - Assessee has failed to prove the credit worthiness of the creditor and also the genuineness of the transaction - Ld CIT(A) was justified in confirming the addition of Rs.4.00 lakhs made u/s 68 of the Act. The Ld A.R contended that the provisions of sec. 68 cannot be invoked in the absence of credit in the books of account. However, assessee cannot use the fact of his failure to maintain the books to his advantage to raise contentions to suit his purpose Decided against the Assessee. Addition of interest income of Rs.15,911/- - Held that - Assessee has declared the above said interest income in cash flow statement, but it was not included in the return of income - Assessing officer did not include the above said income in the reasons recorded for re-opening of assessment - AO is very much entitled to assess the escaped income during the reassessment proceedings, which comes to his notice during the course of assessment Decided against the Assessee. Interest u/s 234B of the Act Held that - Charging of interest is consequential in nature, therefore interest to be charged on the assessee Decided against the Assessee.
Issues Involved:
1. Validity of reopening of assessments. 2. Deposits in the bank account of Francis Joseph. 3. Unexplained credit in the capital account of the firm. 4. Loan taken from Mr. George Joseph added u/s 68. 5. Interest income added. 6. Charging of interest u/s 234B of the Act. 7. Unexplained investment in construction of residential building. 8. Personal expenses. Detailed Analysis: 1. Validity of Reopening of Assessments: The Tribunal initially decided the validity of reopening of assessments in favor of the assessee for the assessment years 1996-97 and 1997-98, leading the revenue to appeal to the High Court. For the assessment years 1998-99 to 2000-01, the Tribunal remanded the issue back to the CIT(A), who held the reopening invalid. The Tribunal later reversed this decision, prompting the assessee to appeal to the High Court. The High Court upheld the validity of reopening and directed the Tribunal to address the merits of the additions. 2. Deposits in the Bank Account of Francis Joseph: The AO added deposits found in the bank account of Francis Joseph to the assessee's income, based on statements and evidence suggesting the account was operated by the assessee. The assessee argued for an opportunity to cross-examine Francis Joseph, but he did not appear for cross-examination. The Tribunal upheld the addition, concluding that the surrounding circumstances and evidence supported the AO's decision. 3. Unexplained Credit in the Capital Account of the Firm: For the assessment year 1996-97, the AO added Rs. 5,60,000 as unexplained credit in the capital account of the firm, which was not reflected in the cash flow statement. The assessee's explanation of receiving funds from various sources was not substantiated with evidence. The Tribunal upheld the addition due to lack of credible evidence. 4. Loan Taken from Mr. George Joseph Added u/s 68: The AO added Rs. 4,00,000 as unexplained credit under section 68, as the lender, George Joseph, could not substantiate his creditworthiness. The Tribunal upheld the addition, citing the failure to prove the genuineness and creditworthiness of the lender. 5. Interest Income Added: The AO added Rs. 15,911 as interest income, which was declared in the cash flow statement but not included in the return. The Tribunal upheld the addition, stating that the AO is entitled to assess escaped income discovered during reassessment proceedings. 6. Charging of Interest u/s 234B of the Act: The Tribunal found the charging of interest under section 234B to be consequential and upheld the decision of the CIT(A). 7. Unexplained Investment in Construction of Residential Building: For the assessment year 2000-01, the AO added Rs. 2,25,767 as unexplained investment in the construction of a residential building. The Tribunal found discrepancies in the cost of construction declared by the assessee and remanded the matter to the AO for fresh examination. 8. Personal Expenses: For the assessment year 1997-98, the AO added Rs. 1,60,224 as unexplained personal expenses. The Tribunal found that the assessee had included only Rs. 1,00,000 as cash inflow in the cash flow statement, which matched the personal expenses, and directed the AO to delete the addition. Conclusion: The appeals filed by the assessee for the assessment years 1996-97 and 1998-99 were dismissed. The appeals for the assessment years 1997-98 and 1999-2000 were partly allowed, and the appeal for the assessment year 2000-01 was treated as partly allowed. All the appeals filed by the revenue were treated as allowed. The judgment was pronounced on 20-09-2013.
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