2015 (8) TMI 280 - HC - Income Tax

Income from undisclosed sources - addition on account of the cash deposits of ₹ 7,23,000/- in the savings account of the assessee - non-confirmation of the sales from the commission agent, the liability was fastened upon the assessee by issuing notice under Section 148 - Held that - The onus of proof was wrongly put upon the assessee mainly because of cash deposits of ₹ 7,23,000/-, which have been now added to his income as income from undisclosed sources. The assessee was never given a proper opportunity to cross examine or rebut the stand of the commission agent who was at that point of time was on the receiving end of the department since an inquiry was being made against him as to how he had made cash payments of such huge amount which had not been reflected in the account books. The order of the Tribunal thus suffers from patent perversity by not taking into account the cumulative factors which are in favour of the assessee and by confirming the additions made against the assessee and accepting the statement of the commission agent as gospel truth. Merely because the appellant was a retired employee and filed his return showing agricultural income admittedly being a owner of agricultural land, the assessing officer was not justified in making the additions on the assumption that the assessee had tried to include his past savings and unaccounted money in the agricultural income. The said finding was totally conjectural and without any basis which further was wrongly upheld by the Commissioner of Income Tax and only partial relief was granted by the Tribunal. Accordingly, the question of law framed is answered in favour of the appellant. The appeal is allowed and the addition of ₹ 7,23,000/- sustained by the Tribunal on account of income from undisclosed sources is set aside - Decided in favour of assessee.

Summary

Issues:
Challenge to the judgment of the Income Tax Appellate Tribunal regarding the disallowance of a specific amount in the assessment year 2004-05.

Analysis:
The appellant initially declared income apart from agricultural income, which was accepted. However, the revenue questioned cash deposits of a significant amount in the appellant's savings account. The appellant explained the source as proceeds from the sale of fruits from his orchard. The assessing authority sought clarification from the commission agent who made the payments. Despite the lack of confirmation from the agent, the liability was imposed on the appellant, leading to a notice under Section 148 of the Income Tax Act. The appellant's challenge to this was rejected, and the deposits were treated as undisclosed income, disregarding his ownership of agricultural land and past retirement.

The Commissioner of Income Tax upheld the addition, citing lack of concrete evidence regarding the transactions with the commission agent. The Tribunal dismissed the appellant's appeal, emphasizing the lack of proof for the source of cash deposits. It considered the revenue record inconclusive about the appellant's land ownership, rejecting the consistency of agricultural income shown in subsequent returns. The Tribunal failed to consider the circumstances favoring the appellant, such as the distance between him and the commission agent, and the lack of opportunity for proper inquiry or cross-examination.

The Tribunal's decision was deemed flawed, as it overlooked crucial factors supporting the appellant and relied solely on the commission agent's statement. The assessing officer's assumption that the appellant included past savings in agricultural income was unfounded. The Commissioner's decision to uphold the addition was criticized for lacking basis. Ultimately, the High Court ruled in favor of the appellant, setting aside the addition of the disputed amount as income from undisclosed sources.

This detailed analysis highlights the procedural discrepancies, evidentiary issues, and misinterpretations of the Tribunal, Commissioner, and assessing officer, leading to the High Court's decision in favor of the appellant.