2015 (10) TMI 255 - HC - Income Tax

Undisclosed income - credit entry not proved - search and seizure operation - Held that - It is needless to point out that when an investment made by a person is claimed to have come from a particular source, it is up to the assessee to prove it. In this case, the assessee did not and could not discharge the burden cast upon him. Therefore, the Assessing Officer as well as the Tribunal were right in holding the issue against the appellant insofar as the amount claimed to have been received from Beauty Apparels is concerned. - Decided against assessee.

Summary

Issues: Appeal under Section 260-A of the Income Tax Act challenging Tribunal's order on undisclosed income sourced from Beauty Apparels.

Analysis:
1. Search and Seizure Action: The Department initiated a search and seizure action at M/s. Sakthi Mayil Finance (P) Ltd., where the appellant was found to have made substantial investments. Consequently, a notice under Section 158-BD of the Income Tax Act was issued, and the appellant admitted undisclosed income for the block period.

2. Investigation and Sources of Investments: Notices under Sections 143(2) and 142(1) were issued to the appellant to establish the sources of investments. Despite furnishing a statement of affairs, the sources could not be substantiated by the appellant.

3. Claimed Loans and Liabilities: The appellant claimed loans and liabilities from various entities, including M/s. Beauty Apparels and individuals, totaling to Rs. 79,32,750. However, summons to these creditors were returned unserved, indicating that the creditors could not be located.

4. Tribunal's Decision: The Tribunal allowed the appellant an opportunity to prove the credit received from Beauty Apparels. Despite the appellant's efforts, including submitting a confirmation letter from the creditor, the Tribunal ruled against the appellant regarding the credit borrowed from Beauty Apparels.

5. Admitted Questions of Law: The appeal admitted questions challenging the Tribunal's decision on the undisclosed income from Beauty Apparels. The appellant failed to establish the source of the claimed amount, leading to the Assessing Officer and Tribunal ruling against the appellant.

6. Burden of Proof and Decision: The burden of proof lies with the assessee when claiming investments from a specific source. As the appellant failed to provide evidence or establish the credit received from Beauty Apparels, both the Assessing Officer and the Tribunal were justified in their decisions against the appellant. Consequently, the questions of law raised by the appellant were answered against them, with no costs awarded.

In conclusion, the High Court upheld the decisions of the Assessing Officer and the Tribunal, ruling against the appellant in establishing the source of undisclosed income claimed to have been received from Beauty Apparels. The burden of proof rested with the appellant, who failed to provide sufficient evidence, resulting in the unfavorable judgment.