2016 (6) TMI 943 - HC - Income Tax

Unexplained investments on account of demand drafts allegedly purchased by the appellant in cash - Held that - Perusing the statement of Hasmukhbhai Shah dated 19.08.2003 before CIT(A) and as per questions no. 19 and 21 the revenue has not been able to prove that the demand drafts purchased in cash belong to the assessee. Even if the onus in respect of the two DDs amounting to ₹ 1,61,527/- is discharged in assessment year 1993-94 in absence of any evidence for the remaining DDs added in assessment year 1993-94 and all other DDs added in other years there is absolutely no manner of justification. The CIT(A) erred in casting negative onus on the assessee when it observed that the the onus is on assessee to submit the necessary details and evidence that those DDs were not purchased by the assessee. Thus, the department has not been successful in proving that the DDs were purchased by the assessee. In that view of the matter, the questions raised in the present appeals are required to be answered in favour of the assessee

Summary

Issues:
Challenge to the addition made as unexplained investments on account of demand drafts allegedly purchased in cash.

Analysis:
1. The appellant challenged the addition of unexplained investments made by the Assessing Officer under section 69 of the Income Tax Act, concerning the purchase of demand drafts from two cooperative banks. The CIT(A) confirmed the assessment, leading to appeals before the Tribunal. The Tribunal directed the CIT(A) to verify the investment, prompting the current appeals.

2. The appellant's counsel argued that the revenue failed to prove the money belonged to the assessee, citing a Supreme Court decision emphasizing the burden of proof on the revenue. The counsel highlighted discrepancies in the evidence presented by the Assessing Officer, including a concession by an officer regarding the application forms' inaccuracies.

3. The respondent's counsel supported the impugned orders, stating that the bank manager confirmed the purchase of demand drafts by the assessee's employees. The appellant's failure to provide books of accounts and employee details was noted, with the respondent contending that the bank records supported the revenue's stance.

4. The Court referred to the Supreme Court decision cited by the appellant, emphasizing the revenue's burden to prove its case. The Court found the revenue failed to discharge this burden, especially in light of discrepancies in the evidence and the negative onus placed on the assessee by the CIT(A).

5. Ultimately, the Court held that the revenue did not prove the assessee purchased the demand drafts, leading to a ruling in favor of the assessee. The impugned orders were quashed, and the appeals were allowed in favor of the assessee.