2015 (4) TMI 835 - HC - Income Tax

Treatment of cash deposits - unexplained cash credit by invoking provisions of section 69 - Held that - In the case before us, the assessee admittedly made an investment of a sum of ₹ 2,01,000/- which was not disclosed by him in the returns filed under Section 139. During search his explanation was that the said deposits were made out of the cash balance available. In the absence of any proof with regard to such availability of funds, the assessing officer treated the aforesaid deposits as the income of the assessee from undisclosed sources. We have not been impressed by the submissions advanced before us by Mr. Sen, learned Advocate for the assessee for more than one reason. In the first place, no such case was made out before the learned Tribunal. Even assuming that investment of a sum of ₹ 2,01,000/- has been reflected in the final accounts of the assessment year 1987-88 and has duly been offered for taxation, nothing was easier for the assessee than to produce a copy thereof before us which may have tilted the balance in his favour. The fact that the assessee-appellant did not take any such step leaves no doubt in our mind that the submissions are not true. The investment discovered during the search and seizure has not been disputed on facts. Therefore, it was a clear case where Section 69 of the Income Tax Act would be applicable and this is what was done. - Decided against assessee.

Summary

Issues:
1. Whether the Tribunal was justified in upholding the treatment of cash deposits in Canara Bank as unexplained cash credit under section 69 of the Income Tax Act, 1961?
2. Whether the Assessing Officer conducted the necessary investigation into the source of deposits in the bank account?
3. Whether the appellant adequately explained the source of the deposits during the assessment year 1987-88?
4. Whether the appellant's failure to produce evidence of the cash balance available to him affected the assessment?

Analysis:
Issue 1:
The appeal challenged the Tribunal's decision upholding the treatment of cash deposits in Canara Bank as unexplained cash credit under section 69 of the Income Tax Act, 1961. The Tribunal justified this treatment based on the material found during the search and seizure, specifically the detection of Savings Bank Account No. 4790 and the deposits made therein. The appellant's defense was that the deposits were made from the cash balance available with him. However, the Tribunal found no attempt by the appellant to offer any explanation regarding the deposits, leading to the application of section 69.

Issue 2:
The appellant contended that the Assessing Officer failed to conduct the necessary investigation into the source of the deposits in the bank account. The appellant emphasized the importance of independent investigation by the Assessing Officer, citing the case of Malabar Industrial Corporation. The Tribunal, however, found that the Assessing Officer was justified in treating the deposits as income from undisclosed sources due to the lack of proof regarding the availability of funds for the deposits.

Issue 3:
The appellant claimed that the deposits in Canara Bank were duly accounted for in the final accounts of the assessment year 1987-88. However, the Tribunal noted that the appellant did not produce any evidence to support this claim. The Tribunal found discrepancies between the explanation offered during the assessment and the one presented before the court, leading to the conclusion that the deposits were indeed unexplained cash credits.

Issue 4:
The appellant's failure to produce evidence of the cash balance available to him during the assessment year 1987-88 raised doubts about the legitimacy of the deposits in Canara Bank. The court applied Clause (g) of Section 114 of the Evidence Act, which allows for an unfavorable presumption when evidence that could be produced is withheld. The court emphasized that the burden of proof lies with the assessee and not solely on the Assessing Officer to find corroboration through independent inquiry.

In conclusion, the court dismissed the appeal, finding no error in the Tribunal's decision. The appellant's failure to provide evidence to support his claims regarding the source of the deposits led to the application of section 69 and the treatment of the deposits as income from undisclosed sources.