2017 (12) TMI 63 - HC - Income Tax

Addition u/s 69 - assessee required to prove source of source - whether the assessee appellant had not sufficiently discharged the primary onus casted upon him? - Held that - Tribunal has committed a serious error inasmuch as in view of the exemption which has been shown as a demand draft was taken on behalf of those persons which has come on record and it clearly established it was a business arrangement which was made. The A.O. has considered it to be as an investment but the amount which was deposited, was not either going to be deposited in terms of the investment or is going to get any interest on it. In that view of the matter under Sec. 69, it will be open for the department to assess those four persons independently as it could not be established the income of the assessee. In that view of the matter, both the issues are answered in favour of the assessee

Summary

Issues:
Challenge to Tribunal's judgment allowing part of appeal and adding income under Section 69 of Income Tax Act.

Analysis:
The High Court framed substantial questions of law regarding the correctness of confirming the addition under Section 69 and sustaining it based on hypothetical assumptions. The appellant contended that the Tribunal erred in adding income under Section 69, arguing that the amount deposited in various accounts belonged to other individuals, not the appellant. The appellant relied on various legal precedents to support their argument, emphasizing that the burden of proof lies on the department to establish the source of funds. The appellant also highlighted discrepancies in the statements of individuals involved and the lack of evidence linking the deposited amount to the appellant.

The respondent, on the other hand, supported the Tribunal's decision and referred to Section 69 of the Income Tax Act, emphasizing the provision regarding unexplained investments. The Court analyzed the facts and found that the Tribunal erred in considering the deposited amount as an investment by the appellant. It was noted that the amount was part of a business arrangement involving other individuals, not intended for investment or interest accrual. Therefore, the Court concluded that the department could assess the other individuals independently as their income could not be established as that of the appellant. Consequently, the Court ruled in favor of the appellant on both issues raised, allowing the appeal.

In conclusion, the High Court's judgment addressed the challenges to the Tribunal's decision regarding the addition under Section 69 of the Income Tax Act. The Court emphasized the importance of establishing the source of funds and clarified that the burden of proof lies with the department. By analyzing the nature of the deposited amount and the lack of evidence linking it to the appellant, the Court ruled in favor of the appellant, allowing the appeal and directing the department to assess the other individuals involved independently.