2017 (4) TMI 1602 - HC - Income Tax

Addition u/s 68 - Discharge of onus to prove credit transaction - HELD THAT - Assessee had discharged his primary onus under Section 68 of the Act. That having been done, the First Appellate Authority was fully justified in taking the view that it was open to the department to take recourse of Section 131 or Section 133(6) of the Act if they were to further proceed. That not having done so, the First Appellate Authority was within its jurisdiction to conclude on facts and law, in favour of the Assessee. Appellate Tribunal, in the Appeal at the instance of the Revenue, has not rendered the decision holding the finding of the First Appellant Authority regarding applicability of Sections 131 and 133(6) of the Act, as the case may be, is erroneous in law. So much so, the impugned decision of the Tribunal stands faulted on a substantial question of law referable to the contents of Section 68 of the Act and the failure of the Revenue to take recourse to Sections 131 and 133(6) of the Act, in the case of the Assessee, where the primary onus under Section 68 of the Act stood discharged by the Assessee. - Decided in favour of the Assessee.

Summary

Issues:
Challenge to assessment order under Section 260-A of the Income Tax Act, 1961. Discharge of burden under Section 68 of the Act by the Assessee. Reversal of decision by the Tribunal. Interpretation of Section 68 of the Act and applicability of Sections 131 and 133(6) in the case.

Analysis:

The appeal was filed by the Assessee challenging an assessment order under Section 260-A of the Income Tax Act, 1961. The First Appellate Authority held that the Assessee had discharged the burden under Section 68 of the Act to the extent required. It was noted that the credit transaction could have been verified from the Income Tax records of the lenders or through sections 131 or 133(6) of the Act. The First Appellate Authority concluded that the addition made by the Assessing Authority was not sustainable as the Assessee had fulfilled the primary onus under Section 68, and the Revenue had not discharged its corollary onus.

The Tribunal, however, reversed the decision of the First Appellate Authority at the instance of the Revenue, leading to the current appeal. The High Court considered the substantial question of law whether the Assessment Officer's opinion under Section 68 could include consideration of any closed assessment. The Court analyzed Section 68, emphasizing the need for the Assessing Authority to consider transactions of persons involved with the Assessee, even if assessments related to the lenders had been concluded. The Court affirmed that the Assessee had met the primary onus under Section 68, and the First Appellate Authority was justified in its decision.

The High Court found fault with the Tribunal's decision, stating that it erred in not upholding the findings of the First Appellate Authority regarding the applicability of Sections 131 and 133(6) of the Act. The Court held that the Tribunal's decision was flawed on a substantial question of law concerning Section 68 and the failure of the Revenue to utilize Sections 131 and 133(6) after the Assessee had discharged the primary onus.

Consequently, the High Court set aside the Tribunal's order, ruling in favor of the Assessee. The appeal was allowed, and the Tribunal's decision was overturned.