2018 (8) TMI 1792 - AT - Income Tax

Addition towards unexplained expenditure u/s 69 - income from other sources - assessee has not disclosed the interest income earned from lending transaction - basic issue of the usage of credit cards by Shri Neelamegan was not proved - HELD THAT - AO examined Shri Neelamegan under section 131 of the Act, who has categorically denied that he has used the credit card of the assessee and moreover, he has stated that he has no idea of four storesnamely M/s. Aakash Decors, M/s. C.R. Agencies, M/s. Jaya Medicals and M/s. Aruna Pharmacy, where the credit cards were used. So far as credit card transactions, Shri Neelamegan has denied the entire transaction. Since the assessee failed to establish that Shri Neelamegan used assessee s credit card and repaid the amount, we find that the addition made by the Assessing Officer was rightly confirmed by the CIT(A). We do not find any infirmity in the order passed by the CIT(A). Accordingly, the ground raised by the assessee stands dismissed.

Summary

Issues:
Addition of unexplained expenditure under section 69 of the Income Tax Act, 1961.

Analysis:
The appeal was filed against the Commissioner of Income Tax (Appeals) order confirming the addition of unexplained expenditure. The assessee's return of income for the relevant assessment year was scrutinized, and credit card payments were disallowed as unexplained expenditure. The Tribunal had earlier directed re-examination of the explanation provided by the assessee. The Assessing Officer treated the unexplained expenditure as income from other sources. The CIT(A) upheld this decision as the assessee failed to prove the source of the funds. The Tribunal considered the submissions and evidence presented. The Assessing Officer summoned a third party, Shri Neelamegan, who denied using the credit card and repaying the amount. The CIT(A) requested details from specific entities related to the credit card transactions, which were not provided by the assessee. As Shri Neelamegan denied involvement in the transactions, the addition made by the Assessing Officer was upheld. The appeal was dismissed, affirming the decision of the lower authorities.

This case highlights the importance of substantiating claims and providing necessary documentation to support transactions. The burden of proof lies with the assessee to establish the legitimacy of expenditures and sources of funds. The denial of involvement by a third party, coupled with the failure to provide requested details, resulted in the confirmation of the addition as unexplained expenditure. The Tribunal's decision underscores the significance of thorough documentation and evidence to support claims during assessment proceedings.